China's - Orient Aviation

that when it ratified [Cape Town] the costof debt to airlines in what were previouslymarkets where it was very difficult to getdeals away, has come right down. There is agreat deal more interest in those markets.”There is no shortage of interest fromglobal investors in placing money intoChinese leasing deals as long as they arebeing done through low tax regimes suchas Ireland.Duffy said the competition is intense.“We are at the point now where innovativetax lease products are being brought to Chinawhen once upon a time you simply couldn’tsee that being possible,” he said.“If you talk to Japanese tax equityinvestors they will tell you now, with nohesitation, they are open for business inChina. And indeed some of the leadingairlines there have already closed innovativetax leases.“What this means for the lessors, thebanks and the lawyers is that there is agreat deal of competition. I haven’t seencompetitive pressures in any market such asthey are in China right now.“Our bank opened its first branch inShanghai last year and last week we drewdown our first direct lending to an airlinethere. There is no offshore special purposecompany. It’s not a top three airline, but aregional airline and I’ve never seen termslike it. We have simply taken the decision todo it because strategically China is such animportant market for us.”Duffy said an interesting trend to watchin the next few years is to what extent theboundaries between banks and lessorsbecome blurred.“BOC has obviously purchased SALEand you have other banks looking to setup leasing businesses. One thing is sure ...unless we see a major liquidity crunch inChina or a major systemic breakdown, theoutlook for bankers, lessors and lawyers,particularly those outside China, is going toget more challenging in terms of winningbusiness,” he said.But the real catalyst, everyone agreed, willbe radical reform of the regulations that coveraircraft purchasing and leasing in China.‘We are at the point now whereinnovative tax lease productsare being brought to China.’John DuffyHead of Transportation, AsiaHSH NordBankMiddle Eastspending spreeStand by for a spending spree fromone of the world’s newest aircraftleasing companies. DAE Capital,the leasing division of DubaiAerospace Enterprise (DAE), ison the verge of a buying splurge that willeventually make it a major competitor toglobal players such as GE CommercialAviation Services (GECAS) and InternationalLease Finance Corporation (ILFC).Either this month or by early December,DAE Capital’s chief executive, RobertGenise, expects to sign a deal to acquire 30used aircraft, costing around $1.5 billion, tolaunch the business.At the same time, he is in discussionwith Boeing and Airbusabout a major order for newjets for delivery after 2010,part of a strategy that will seeDAE Capital’s fleet reach 125aircraft within five years.“Our business plan callsfor us to acquire a block ofaircraft immediately to jumpstart the business and haveabout $1.5 billion on the booksby year-end,” said Genise, aleasing industry veteran andformer chief executive ofBoullioun Aviation Servicesin the U.S, in a statement.“After that, we want tospend about $1 billion eachyear to expand the business.I expect we would have $5 billion in assetsand have annual revenues in excess of $500million a year at the end of 2011.”With the number of aircraft operatingin the Middle East growing at a staggering60% annually in the past decade, comparedto a global average of just 12%, it is hardlysurprising the oil-rich sheikhs of the Gulfhave decided aircraft leasing is a hot targetfor investment. Arab carriers have placedorders for $80 billion worth of jets in thelast three years, with $32 billion in ordersannounced at the Paris Air Show in June.DAE was set up last year by the Dubaigovernment and its ruling family as aninvestment vehicle to channel $15 billion into‘The global needsfor aircraft arestaggering’Robert GeniseChief ExecutiveDAE Capital>>>>>>>>>>>creating a global aerospace manufacturingand services corporation.It has six operational subsidiaries,including leasing, and has become activeglobally in investments in airports and otheraviation services and infrastructure.It failed earlier this year in its $1.8billion bid for New Zealand’s AucklandInternational airport.When DAE was launched its chairman,HH Sheikh Ahmed Bin Saeed Al Maktoum,president of Dubai’s Department of CivilAviation and chairman of the EmiratesGroup, said DAE would form strategicalliances with the leading aerospacecompanies as it steps up its bid to becomea significant presence in theindustry.“Within 10 years, DAEwill become an integralpart of the global aerospaceindustry,” he said.DAE Capital looks set toplay its part. The company’sfleet will eventually comprisearound 70% narrowbodyaircraft, such as the B737and A320 types, with theremainder widebody jetssuch as the A330 and A350or the B777 and B787.Genise said the B747-8 isbeing considered as part of afreighter fleet, with freighterconversion opportunities,probably involving B757s and B767s, alsopossibilities.DAE capital has no intention of confiningits activities to the Middle East.“The global needs for aircraft arestaggering. We will be doing businessglobally,” said Genise.He believed his company’s largest marketwill be Europe, followed by the Asia-Pacific.He puts the Middle East in third place and theAmericas fourth.Genise expected the 25% of aircraftownership currently held by commerciallessors will grow as airlines continue to lookfor alternative, more economical ways tofinance fleet expansion and replacement.NOVEMBER 2007 ORIENT AVIATION 61